Looking over the last 35 years of history, I want to make the following proposal: the Dictator Retirement Island.

Here is how it works. The US puts a sum of money in a Swiss account for the dictator. The US moves dictator to a lush island complete with lavish lifestyle complete with personal performances from US pop stars (this seems to be a very popular activity for both dictators and US singers). The US guards the dictator from vengeful rebel groups, human rights organizations, threats if extradition, etc. In exchange the dictator gives up power and allows the US to impose an interim Constitution and supervise free elections.

It used to be that deposed kings/emperors/strong men could find a home in exile somewhere. The promise of exile probably helped prevent scorched-Earth battles by dictators who know that loss of power will mean torture and death. The German Kaiser lived in exile for 20 years in the Netherlands after WWI.

Advantages:

A whole lot cheaper than military action -- the first 10 minutes of our involvement in Libya when we launched a bunch of cruise missiles cost over $100 million.

Saves a lot of lives, both citizens and US military

Increases frequency of positive regime changes

Disadvantages:

To say the least, monetary rewards heaped on ruthless dictators are fairly unsatisfying

Ticks off human rights groups. More importantly, ticks off rebel groups in home country (even giving medical care in US to deposed Shah was a huge problem for Iranian rebels)

Many still might not accept, even when backed into a wall. It's the power that is compelling, not just the money and lifestyle, and most dictators are really good at denying reality

Three days after the BP oil spill in the Gulf of Mexico began on April 20, the Netherlands offered the U.S. government ships equipped to handle a major spill, one much larger than the BP spill that then appeared to be underway. "Our system can handle 400 cubic metres per hour," Weird Koops, the chairman of Spill Response Group Holland, told Radio Netherlands Worldwide, giving each Dutch ship more cleanup capacity than all the ships that the U.S. was then employing in the Gulf to combat the spill....

In sharp contrast to Dutch preparedness before the fact and the Dutch instinct to dive into action once an emergency becomes apparent, witness the American reaction to the Dutch offer of help. The U.S. government responded with "Thanks but no thanks," remarked Visser, despite BP's desire to bring in the Dutch equipment and despite the no-lose nature of the Dutch offer --the Dutch government offered the use of its equipment at no charge. Even after the U.S. refused, the Dutch kept their vessels on standby, hoping the Americans would come round. By May 5, the U.S. had not come round. To the contrary, the U.S. had also turned down offers of help from 12 other governments, most of them with superior expertise and equipment --unlike the U.S., Europe has robust fleets of Oil Spill Response Vessels that sail circles around their make-shift U.S. counterparts.

Why does neither the U.S. government nor U.S. energy companies have on hand the cleanup technology available in Europe? Ironically, the superior European technology runs afoul of U.S. environmental rules. The voracious Dutch vessels, for example, continuously suck up vast quantities of oily water, extract most of the oil and then spit overboard vast quantities of nearly oil-free water. Nearly oil-free isn't good enough for the U.S. regulators, who have a standard of 15 parts per million -- if water isn't at least 99.9985% pure, it may not be returned to the Gulf of Mexico....

The Americans, overwhelmed by the catastrophic consequences of the BP spill, finally relented and took the Dutch up on their offer -- but only partly. Because the U.S. didn't want Dutch ships working the Gulf, the U.S. airlifted the Dutch equipment to the Gulf and then retrofitted it to U.S. vessels. And rather than have experienced Dutch crews immediately operate the oil-skimming equipment, to appease labour unions the U.S. postponed the clean-up operation to allow U.S. crews to be trained.

Years ago, my parents actually hosted Queen Beatrix's visit to Houston. As a libertarian, I don't have much use for hereditary monarchy, but she was quite approachable and helped smooth over my wtf-am-I-doing-here nervousness at the event. She also paid a visit to Princeton University while I was there, so she's got that going for her too.

Hillary has jumped on the gas tax holiday along with John McCain. Kevin Drum calls it pure demagoguery (he probably wouldn't have been so blunt about Hillary, but since he already derided McCain for the idea, he has the good grace to apply the same criticisms to Hillary:

I'd say there's approximately a zero percent chance that Hillary
Clinton or John McCain actually believe this is good policy. It would
increase oil company profits, it would make hardly a dent in the price
of gasoline, it would encourage more summertime driving, and it would
deprive states of money for transit projects. Their staff economists
know this perfectly well, and so do they.

But they don't care. It's a way to engage in some good, healthy
demagoguery, and if there's anything that the past couple of months
have reinforced, it's the notion that demagoguery sells. Boy does it
sell.

I tend to agree with Drum. The gas tax, at least when applied to its original purpose of funding highways and roads, is one of the better taxes out there, doing a pretty good job of matching the costs of roads to the users of the roads. However, I did make this point in Drum's comment section:

I am glad you see that an 18.4 cent gas price reduction is small compared to the total price and proposing such a reduction by government fiat is pure demagoguery.

I would like to point out that most oil companies have a profit on a wholesale gallon of gas that is also about 18-20 cents. The reason they make so much money is that they sell a lot of gallons of gas (plus many other petroleum products). So is it similarly pure demagoguery to blame oil company profits for the price of gas, or to suggest government schemes (e.g. windfall profits tax) to reduce these profits?

By the way, Hillary is particularly hypocritical on this, because she has adopted the 80 by 50 CO2 target (80% reduction by 2050). To meet this target, which I think would be an economic disaster, is not going to require an 18.4 cent gas tax, but something like a $10 a gallon gas tax, or more. Since she has adopted her 80 by 50 target, her correct answer on gas taxes should not be to propose a holiday, but to say "suck it up, because taxes are going to go a hell of a lot higher." McCain, who has also adopted a CO2 target, though a less stringent one, is in the same boat.

Update: OK, the $10 per gallon tax is probably gross under-estimated. The number is likely to have to be much higher than that, given that Europeans are already paying nearly $10 a gallon and are not even in the ballpark of these CO2 targets.

Happy Birthday to the greatestn nation on earth. I spend a lot of time criticizing our leaders and their policies, but there is no place else I would live. The US Constitution is still, over two-hundred years after its creation, the greatest single document ever written. Many other countries since have written constitutions and spilled tons of ink pontificating on theories of government, but none have had similar success in protecting individual rights while creating an environment where every individual can focus their productive energies in whatever direction they choose with generally minimal interference.

There was a philosophical and intellectual
change where questioning established beliefs and social patterns went
from being heresy and unthinkable to being acceptable, and even in
vogue. In other words, men, at first just the elite but soon everyone,
were urged to use their mind rather than just relying on established
beliefs

There were social and political changes that greatly increased
the number of people capable of entrepreneurship. Before this time,
the vast vast majority of people were locked into social positions that
allowed them no flexibility to act on a good idea, even if they had
one. By starting to create a large and free middle class, first in the
Netherlands and England and then in the US, more people had the ability
to use their mind to create new wealth. Whereas before, perhaps 1% or
less of any population really had the freedom to truly act on their
ideas, after 1700 many more people began to have this freedom.

Many revisionist historians struggle to find some alternate explanation for the wealth and power the US enjoys today -- natural resources, isolation, luck, etc. But the simple and correct explanation is that more than any other country past or present, we created a country where more people are free to use their minds and more freely pursue the implications of their ideas.

Sure, our leaders, our military, and sometimes the nation as a whole screws up. I and others are quick to point these screw-ups out and sometimes we find ourselves wallowing in them. But at the end of the day, unlike in the majority of countries in the world, these screw-ups are treated as such, talked about and debated, and dealt with rather than treated as the norm.

Take the US military in an occupying role in Iraq. Out of 100,000 or so people, you are going to have some criminals who commit criminal acts, even in the military. The US army, unlike nearly every occupying army in history, generally treats its soldiers' crimes as crimes, and not as the inherent right of victors to rape and pillage. US soldiers who have committed crimes in Iraq will generally go to jail, while worse malefactors in most armies, even the holier-than-thou UN peacekeepers who seem to be engaging in rape and white slavery around the world, generally go unpunished. For all the crap the US military takes around the world, I bet you that if you took an honest vote on the question of "Which world army would you choose to occupy your country if you lost a war" most people would answer the US. If for no other reason because, despite all the charges of imperialism, our armies eventually leave rather than remain on as lingering masters.

So tomorrow, I will start dealing out more crap to our leaders, to the administration, to Congress, to the SCOTUS, and most especially to most every bureaucrat who thinks they can better manage my business or my property. But today I will step back and see the forest rather than the trees, and observe I am dang lucky to be an American.

For further thoughts, I refer you to my essay last year where I opined that many Americans miss the true greatness of America. They tend to celebrate first the "right to vote", when in fact many people get to vote but few enjoy the freedoms we do. The greatness of our country is in our protection of individual liberties and the rule of law. And the great insight our country was founded with is that rights flow from the very fact of our humanity -- they are not granted to us by kings or Congress. This last is perhaps most important, as I wrote:

At the end of the day, our freedoms in this country will only last so
long as we as a nation continue to hold to the principle that our
rights as individuals are our own, and the government's job is to
protect them, not to ration them. Without this common belief, all the
other institutions we have discussed, from voting to the rule of law to
the Constitution, can be subverted in time

Now I am off to see Buckingham Palace. If I see the Queen, would it be in bad taste to wish her a happy Fourth of July?

I was going to write a Fourth of July post, but it kept looking like my past Memorial Day effort, so, since I am in France and ready to go consume more food, I will take a shortcut this holiday:

Every Memorial Day, I am assaulted with various quotes from people
thanking the military for fighting and dying for our right to vote. I
would bet that a depressing number of people in this country, when
asked what their most important freedom was, or what made America
great, would answer "the right to vote."

In my mind, there are at least three founding principles of the
United States that are far more important than the right to vote:

The Rule of Law. For about 99% of human
history, political power has been exercised at the unchecked capricious
whim of a few individuals. The great innovation of western countries
like the US, and before it England and the Netherlands, has been to
subjugate the power of individuals to the rule of law. Criminal
justice, adjudication of disputes, contracts, etc. all operate based on
a set of laws known to all in advance.

Today the rule of law actually faces a number of threats in this
country. One of the most important aspects of the rule of law is that
legality (and illegality) can be objectively determined in a repeatable
manner from written and well-understood rules. Unfortunately, the
massive regulatory and tax code structure in this country have created
a set of rules that are subject to change and interpretation constantly at
the whim of the regulatory body. Every day, hundreds of people and
companies find themselves facing penalties due to an arbitrary
interpretation of obscure regulations (examples I have seen personally here).

Sanctity and Protection of Individual Rights.
Laws, though, can be changed. In a democracy, with a strong rule of
law, we could still legally pass a law that said, say, that no one is
allowed to criticize or hurt the feelings of a white person. What
prevents such laws from getting passed (except at major universities)
is a protection of freedom of speech, or, more broadly, a recognition
that individuals have certain rights that no law or vote may take
away. These rights are typically outlined in a Constitution, but are
not worth the paper they are written on unless a society has the desire
and will, not to mention the political processes in place, to protect
these rights and make the Constitution real.

Today,
even in the US, we do a pretty mixed job of protecting individual
rights, strongly protecting some (like free speech) while letting
others, such as property rights or freedom of association, slide.

Government is our servant.
The central, really very new concept on which this country was founded
is that an individual's rights do not flow from government, but are
inherent to man. That government in fact only makes sense to the
extent that it is our servant in the defense of our rights, rather than
as the vessel from which these rights grudgingly flow.

Statists
of all stripes have tried to challenge this assumption over the last
100 years. While their exact details have varied, every statist has
tried to create some larger entity to which the individual should be
subjugated: the Proletariat, the common good, God, the master race.
They all hold in common that the government's job is to sacrifice one
group to another. A common approach among modern statists is to create
a myriad of new non-rights to dilute and replace our fundamental rights
as individuals. These new non-rights, such as the "right" to health
care, a job, education, or even recreation, for god sakes, are
meaningless in a free society, as they can't exist unless one
person is harnessed involuntarily to provide them to another person.
These non-rights are the exact opposite of freedom, and in fact require
enslavement and sacrifice of one group to another.

Our population explosion not only detracts from our quality of life but
threatens our liberties and freedom as well. As Cornell's Pimentel puts
it, "Back when we had, say, 100 million people in the U.S., when I
voted, I was one of 100 million people. Today, I am one of 285 million
people, so my vote and impact decreases with the increase in the
population." Pimentel adds, "So our freedoms also go down the drain."

What??
In a society with a rule of law protecting individual rights, how does
having a diluted vote reduce your freedom? The only way it does, and therefore what must be in the author's head, is if
one looks at government as a statist tug of war, with various parties
jockeying for a majority so they can plunder the minority. But in this
case, freedom and rule of law are already dead, so what does a
dilution of vote matter? He is arguing that dilution of political
power reduces freedom -- this country was rightly founded on just the
opposite notion, that freedom requires a dilution of political power.

At the end of the day, our freedoms in this country will only last
so long as we as a nation continue to hold to the principle that our
rights as individuals are our own, and the government's job is to
protect them, not to ration them. Without this common belief, all the
other institutions we have discussed, from voting to the rule of law to
the Constitution, can be subverted in time.

So to America's soldiers, thank you. Thank you for protecting this
fragile and historically unique notion that men and women own
themselves and their lives.

Every Memorial Day, I am assaulted with various quotes from people thanking the military for fighting and dying for our right to vote. I would bet that a depressing number of people in this country, when asked what their most important freedom was, or what made America great, would answer "the right to vote."

In my mind, there are at least three founding principles of the United States that are far more important than the right to vote:

The Rule of Law. For about 99% of human history, political power has been exercised at the unchecked capricious whim of a few individuals. The great innovation of western countries like the US, and before it England and the Netherlands, has been to subjugate the power of individuals to the rule of law. Criminal justice, adjudication of disputes, contracts, etc. all operate based on a set of laws known to all in advance.

Today the rule of law actually faces a number of threats in this country. One of the most important aspects of the rule of law is that legality (and illegality) can be objectively determined in a repeatable
manner from written and well-understood rules. Unfortunately, the massive regulatory and tax code structure in this country have created a set of rules that are subject to change and interpretation constantly at the whim of the regulatory body. Every day, hundreds of people and companies find themselves facing penalties due to an arbitrary interpretation of obscure regulations (examples I have seen personally here).

Sanctity and Protection of Individual Rights. Laws, though, can be changed. In a democracy, with a strong rule of law, we could still legally pass a law that said, say, that no one is allowed to criticize or hurt the feelings of a white person. What prevents such laws from getting passed (except at major universities) is a protection of freedom of speech, or, more broadly, a recognition that individuals have certain rights that no law or vote may take away. These rights are typically outlined in a Constitution, but are not worth the paper they are written on unless a society has the desire and will, not to mention the political processes in place, to protect these rights and make the Constitution real.

Today, even in the US, we do a pretty mixed job of protecting individual rights, strongly protecting some (like free speech) while letting others, such as property rights or freedom of association, slide.

Government is our servant. The central, really very new concept on which this country was founded is that an individual's rights do not flow from government, but are inherent to man. That government in fact only makes sense to the extent that it is our servant in the defense of our rights, rather than as the vessel from which these rights grudgingly flow.

Statists of all stripes have tried to challenge this assumption over the last 100 years. While their exact details have varied, every statist has tried to create some larger entity to which the individual should be subjugated: the Proletariat, the common good, God, the master race. They all hold in common that the government's job is to sacrifice one group to another. A common approach among modern statists is to create a myriad of new non-rights to dilute and replace our fundamental rights as individuals. These new non-rights, such as the "right" to health care, a job, education, or even recreation, for god sakes, are meaningless in a free society, as they can't exist unless one
person is harnessed involuntarily to provide them to another person.
These non-rights are the exact opposite of freedom, and in fact require
enslavement and sacrifice of one group to another.

Our population explosion not only detracts from our quality of life but threatens our liberties and freedom as well. As Cornell's Pimentel puts it, "Back when we had, say, 100 million people in the U.S., when I voted, I was one of 100 million people. Today, I am one of 285 million people, so my vote and impact decreases with the increase in the population." Pimentel adds, "So our freedoms also go down the drain."

What??

In a society with a rule of law protecting individual rights, how does having a diluted vote reduce your freedom? The only way it does, and therefore what must be in the author's head, is if one looks at government as a statist tug of war, with various parties jockeying for a majority so they can plunder the minority. But in this case, freedom and rule of law are already dead, so what does a dilution of vote matter? He is arguing that dilution of political power reduces freedom -- this country was rightly founded on just the opposite notion, that freedom requires a dilution of political power.

At the end of the day, our freedoms in this country will only last so long as we as a nation continue to hold to the principle that our rights as individuals are our own, and the government's job is to protect them, not to ration them. Without this common belief, all the other institutions we have discussed, from voting to the rule of law to the Constitution, can be subverted in time.

So to America's soldiers, thank you. Thank you for protecting this fragile and historically unique notion that men and women own themselves and their lives.

Well, it worked for Johnny Carson, why not for me? Instead of leaving you with dead air (photons?) while I am knocking the rust off my beer pong skills back at Princeton, I will share with you a few of my favorite posts from my early days of blogging. Since most of these posts were viewed by about 5 people, there is a certain temptation to just recycle them without attribution, given the unlikelihood of getting caught. Instead, though, I will share them as my best of Coyote...This post was from early last December, and is titled "60 Second Refutation of Socialism, While Sitting at the Beach":

Last week, there were several comments in Carnival of the
Capitalists that people would like to see more articles highlighting
the benefits of capitalism. This got me thinking about a conversation
I had years ago at the beach:

Hanging
out at the beach one day with a distant family member, we got into a
discussion about capitalism and socialism. In particular, we were
arguing about whether brute labor, as socialism teaches, is the source
of all wealth (which, socialism further argues, is in turn stolen by
the capitalist masters). The young woman, as were most people her age,
was taught mainly by the socialists who dominate college academia
nowadays. I was trying to find a way to connect with her, to get her
to question her assumptions, but was struggling because she really had
not been taught many of the fundamental building blocks of either
philosophy or economics, but rather a mish-mash of politically correct
points of view that seem to substitute nowadays for both.

One
of the reasons I took up writing a blog is that I have never been as
snappy or witty in real-time discussions as I would like to be, and I
generally think of the perfect comeback or argument minutes or hours
too late. I have always done better with writing, where I have time to
think. However, on this day, I had inspiration from a half-remembered
story I had heard before. I am sure I stole the following argument
from someone, but to this day I still can't remember from whom.

I
picked up a handful of sand, and said "this is almost pure silicon,
virtually identical to what powers a computer. Take as much labor as
you want, and build me a computer with it -- the only limitation is you
can only have true manual laborers - no engineers or managers or other
capitalist lackeys".

Yeah, I know
what you're thinking - beach sand is not pure silicon - it is actually
silicon dioxide, SiO2, but if she didn't take any economics she
certainly didn't take any chemistry or geology.

She
replied that my request was BS, that it took a lot of money to build an
electronics plant, and her group of laborers didn't have any and
bankers would never lend them any.

All
too many defenders of capitalism would have stopped here, and said
aha! So you admit you need more than labor - you need capital too.
But Marx would not have disagreed - he would have said it was the
separation of labor and capital that was bad - only when laborers owned
the capital, rather than being slaves to the ruling class that now
controls the capital, would the world reach nirvana. So I offered her
just that:

I
told her - assume for our discussion that I have tons of money, and I
will give you and your laborers as much as you need. The only
restriction I put on it is that you may only buy raw materials - steel,
land, silicon - in their crudest forms. It is up to you to assemble
these raw materials, with your laborers, to build the factory and make
me my computer.

She thought for a few seconds, and responded "but I can't - I don't know how. I need someone to tell me how to do it"

And
that is the heart of socialism's failure. For the true source of
wealth is not brute labor, or even what you might call brute capital,
but the mind. The mind creates new technologies, new products, new
business models, new productivity enhancements, in short, everything
that creates wealth. Labor or capital without a mind behind it is
useless.

How? What changed? Historians who really study this
stuff would probably point to a jillion things, but in my mind two are
important:

There was a philosophical and intellectual
change where questioning established beliefs and social patterns went
from being heresy and unthinkable to being acceptable, and even in
vogue. In other words, men, at first just the elite but soon everyone,
were urged to use their mind rather than just relying on established
beliefs

There were social and political changes that greatly increased
the number of people capable of entrepreneurship. Before this time,
the vast vast majority of people were locked into social positions that
allowed them no flexibility to act on a good idea, even if they had
one. By starting to create a large and free middle class, first in the
Netherlands and England and then in the US, more people had the ability
to use their mind to create new wealth. Whereas before, perhaps 1% or
less of any population really had the freedom to truly act on their
ideas, after 1700 many more people began to have this freedom.

So today's wealth, and everything that goes with it (from shorter
work hours to longer life spans) is the result of more people using
their minds more freely.

Look around the world - for any country, ask yourself if the average
person in that country has the open intellectual climate that
encourages people to think for themselves, and the open political and
economic climate that allows people to act on the insights their minds
provide and to keep the fruits of their effort. Where you can answer
yes to both, you will find wealth and growth. Where you answer no to
both, you will find poverty and misery.

UPDATE

While it is not exactly a direct follow-on to this article, see my post Progressives are too Conservative to Like Capitalism
for an analysis of some of capitalism's detractors. For yet another
way to explain capitalism, at least libertarian philosophy, here is a new-agy approach that is actually pretty good. Finally, Spontaneous Order
has an interesting post comparing religious creationism in the physical
world with progressives' statism in the economic/social realms.

I have always been amazed that so many civil libertarians have embraced multi-culturalism. To be a good civil libertarian, you have to be willing to defend a certain set of principles about individual rights ruthlessly against all intrusion. But to be a multi-culturalist, you have to be willing to accept values and behaviors that are wildly out of sync with western liberalism as equally "OK". These two never seemed reconcilable to me -- civil libertarians pursue moral absolutes, while multi-culturalism preaches that there are no absolutes.

Those on the left who have tried to embrace both civil liberties and multi-culturalism have sometimes had to bend themselves into pretzels to try to reconcile these beliefs. Today we have the unbelievable spectacle of the same people accusing the US of becoming a theocracy because it is slow to embrace gay marriage at the same time defending radical Muslim groups who would kill gays on sight. We can watch people go ballistic decrying naked human pyramids as "torture" but still defend Saddam and his Baathists as freedom fighters despite the hundreds of thousands they put into mass graves. And we can observe that the same people who are trying to invalidate judge candidates because they went to prayer breakfasts are calling flushing a Koran down the toilet "torture".

I suspect, though, that the highly illiberal teachings of the Muslim religion may finally be forcing the left to recognize the incompatibilities of their civil libertarianism and their belief in cultural moral equivalence. This is the theme of a great new piece by Cathy Young in Reason:

The tension between two pillars of the modern left"”multiculturalism and
progressive views on gender"”is not new. It has been particularly thorny
in many European countries where, in lieu of an American-style "melting pot"
approach, immigrants have been traditionally encouraged to maintain their
distinct values and ways. Recently, however, these tensions have started to
come out into the open. According to aMarch article
in the German magazine, Der Spiegel, the murder of Dutch filmmaker
Theo Van Gogh by an Islamic extremist last November after he had made a
documentary about the oppression of Muslim women "galvanized the Netherlands
and sent shock waves across Europe."...

Misogyny and gay-bashing"”religiously motivated or not"”still exist
in Western societies as well, though at least they are widely condemned by
the mainstream culture. We should be able to say, loud and clear, that the
modern values of individual rights, equality, and tolerance are
better"”and just say no to multiculturalist excuses for bigotry.

Socialists and "progressives" of various stripes always want to argue that the distribution of wealth among nations is basically due to luck, in large part related to the distribution of natural resources.

This is disprovable in about 2 seconds: Russia (via Cafe Hayek) and the Netherlands. Russia, resource-wise, is perhaps the richest country in the world. It is, our could be, among the largest producers of any number of natural resources, from diamonds and gold to oil and uranium. But its economy is a disaster. The Netherlands, resource wise, has about nothing. There are few third world economic hell-holes that don't begin with infinitely more resources than the Dutch, but the Dutch are among the richest nations in the world.

Wealth comes not from labor or capital or resources - wealth comes from the mind, and as such requires a rule of law where the mind is free not only to imagine new ideas but to pursue and reap the fruits of these ideas. As I said in this article:

There was a philosophical and intellectual
change where questioning established beliefs and social patterns went
from being heresy and unthinkable to being acceptable, and even in
vogue. In other words, men, at first just the elite but soon everyone,
were urged to use their mind rather than just relying on established
beliefs

There were social and political changes that greatly increased
the number of people capable of entrepreneurship. Before this time,
the vast vast majority of people were locked into social positions that
allowed them no flexibility to act on a good idea, even if they had
one. By starting to create a large and free middle class, first in the
Netherlands and England and then in the US, more people had the ability
to use their mind to create new wealth. Whereas before, perhaps 1% or
less of any population really had the freedom to truly act on their
ideas, after 1700 many more people began to have this freedom.

So today's wealth, and everything that goes with it (from shorter
work hours to longer life spans) is the result of more people using
their minds more freely.

Last week, there were several comments in Carnival of the Capitalists that people would like to see more articles highlighting the benefits of capitalism. This got me thinking about a conversation I had years ago at the beach:

Hanging out at the beach one day with a distant family member, we got into a discussion about capitalism and socialism. In particular, we were arguing about whether brute labor, as socialism teaches, is the source of all wealth (which, socialism further argues, is in turn stolen by the capitalist masters). The young woman, as were most people her age, was taught mainly by the socialists who dominate college academia nowadays. I was trying to find a way to connect with her, to get her to question her assumptions, but was struggling because she really had not been taught many of the fundamental building blocks of either philosophy or economics, but rather a mish-mash of politically correct points of view that seem to substitute nowadays for both.

One of the reasons I took up writing a blog is that I have never been as snappy or witty in real-time discussions as I would like to be, and I generally think of the perfect comeback or argument minutes or hours too late. I have always done better with writing, where I have time to think. However, on this day, I had inspiration from a half-remembered story I had heard before. I am sure I stole the following argument from someone, but to this day I still can't remember from whom.

I picked up a handful of sand, and said "this is almost pure silicon, virtually identical to what powers a computer. Take as much labor as you want, and build me a computer with it -- the only limitation is you can only have true manual laborers - no engineers or managers or other capitalist lackeys".

Yeah, I know what you're thinking - beach sand is not pure silicon - it is actually silicon dioxide, SiO2, but if she didn't take any economics she certainly didn't take any chemistry or geology.

She replied that my request was BS, that it took a lot of money to build an electronics plant, and her group of laborers didn't have any and bankers would never lend them any.

All too many defenders of capitalism would have stopped here, and said aha! So you admit you need more than labor - you need capital too. But Marx would not have disagreed - he would have said it was the separation of labor and capital that was bad - only when laborers owned the capital, rather than being slaves to the ruling class that now controls the capital, would the world reach nirvana. So I offered her just that:

I told her - assume for our discussion that I have tons of money, and I will give you and your laborers as much as you need. The only restriction I put on it is that you may only buy raw materials - steel, land, silicon - in their crudest forms. It is up to you to assemble these raw materials, with your laborers, to build the factory and make me my computer.

She thought for a few seconds, and responded "but I can't - I don't know how. I need someone to tell me how to do it"

And that is the heart of socialism's failure. For the true source of wealth is not brute labor, or even what you might call brute capital, but the mind. The mind creates new technologies, new products, new business models, new productivity enhancements, in short, everything that creates wealth. Labor or capital without a mind behind it is useless.

How? What changed? Historians who really study this stuff would probably point to a jillion things, but in my mind two are important:

There was a philosophical and intellectual change where questioning established beliefs and social patterns went from being heresy and unthinkable to being acceptable, and even in vogue. In other words, men, at first just the elite but soon everyone, were urged to use their mind rather than just relying on established beliefs

There were social and political changes that greatly increased the number of people capable of entrepreneurship. Before this time, the vast vast majority of people were locked into social positions that allowed them no flexibility to act on a good idea, even if they had one. By starting to create a large and free middle class, first in the Netherlands and England and then in the US, more people had the ability to use their mind to create new wealth. Whereas before, perhaps 1% or less of any population really had the freedom to truly act on their ideas, after 1700 many more people began to have this freedom.

So today's wealth, and everything that goes with it (from shorter work hours to longer life spans) is the result of more people using their minds more freely.

Look around the world - for any country, ask yourself if the average person in that country has the open intellectual climate that encourages people to think for themselves, and the open political and economic climate that allows people to act on the insights their minds provide and to keep the fruits of their effort. Where you can answer yes to both, you will find wealth and growth. Where you answer no to both, you will find poverty and misery.

UPDATE

While it is not exactly a direct follow-on to this article, see my post Progressives are too Conservative to Like Capitalism for an analysis of some of capitalism's detractors. For yet another way to explain capitalism, at least libertarian philosophy, here is a new-agy approach that is actually pretty good. Finally, Spontaneous Order has an interesting post comparing religious creationism in the physical world with progressives' statism in the economic/social realms.